CAN0 20060118 GUANGZHOU, CHINA : A construction worker welds at a new building in the Chinese boomtown of Guangzhou, a south China city of 10 million along the Pearl River that has emerged as a major commercial center, on Wednesday, 18 January, 2006. less

CAN0 20060118 GUANGZHOU, CHINA : A construction worker welds at a new building in the Chinese boomtown of Guangzhou, a south China city of 10 million along the Pearl River that has emerged as a major commercial ... more

Photo: David G. McIntyre

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CAN0 20060117 GUANGZHOU, CHINA : Buildings line the edge of the Pearl River in the Chinese boomtown of Guangzhou, a south China city of 10 million that has emerged as a major commercial center, shown on Tuesday, 17 January, 2006. less

CAN0 20060117 GUANGZHOU, CHINA : Buildings line the edge of the Pearl River in the Chinese boomtown of Guangzhou, a south China city of 10 million that has emerged as a major commercial center, shown on ... more

Photo: David G. McIntyre

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Guangzhou, China. Chronicle Graphic

Guangzhou, China. Chronicle Graphic

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Land of opportunity / China's bustling Guangdong province is emerging as an export hot spot

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2006-01-22 04:00:00 PDT Guangzhou, China -- As far back as the second century B.C., Chinese ships set sail from this storied city on the Pearl River for the far shores of India and Africa, laden with fine Chinese silk.

Today, Guangzhou is still a bustling trading center, with mammoth container vessels departing from here and nearby boomtown Shenzhen, loaded with computers, toys, textiles, electronics and cars bound for ports around the world.

Also known as Canton, this city of more than 10 million people is the capital and largest city in Guangdong province, China's leading maker of exported goods and its most powerful magnet for foreign companies.

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Many such companies are based in California, where the province has forged strong commercial and cultural links, thanks to generations of Chinese immigrants to the Golden State.

Lured by tax cuts, cheap land, newly built infrastructure and other incentives, major Bay Area companies such as Cisco Systems Inc., Intel Corp. and Autodesk Software Co. are active in Guangdong province. Increasingly, so, too, are smaller companies such as Dublin's Achievo Corp., a software and information-technology outsourcer, and Richmond's MBA Polymers Inc., a recycler of plastic from junked personal computers.

International companies in Guangdong are often led by Chinese Americans whose cultural and linguistic ties to the province make business deals a relatively easy "get." Guangdong also exercises a powerful appeal for mainland Chinese, who flock to the southeastern coastal province in search of opportunity.

As a result, Guangdong is a dynamic polyglot of big-idea entrepreneurs, powerful executives at the helm of major shipping and manufacturing concerns, newly arrived job-seekers from around the country and enterprising foreign expatriates. (See accompanying profiles on Page J6.)

Less glamorous and politically important than Beijing or Shanghai, some parts of Guangdong province are more prosperous than either, thanks to radical pro-market reforms introduced here in the late 1970s, before change took root anywhere else in China, which is still nominally communist.

Indeed, this swath of the Pearl River Delta area "has been the fastest-growing portion of the fastest-growing province in the fastest-growing major economy in the world," notes a report from Invest Hong Kong, a government agency in Hong Kong, 60 miles from Guangzhou and closely tied to it by commerce.

The poetically named Pearl is very much a working river in the modern mode. Giant metal cranes and stacked cargo containers flank the waterway as it nears the South China Sea. Polluted battleship-gray skies over the river in central Guangzhou display the cost of breakneck industrialization. Nevertheless, new companies continue to come; some are zeroing in on the area's environmental needs, finding market opportunities there.

MBA Polymers, partnering with state-owned Guangzhou Iron & Steel, recently built a $12.6 million plant on land that used to be covered by banana trees. The plant, opened late last year, is 55 percent owned by MBA Polymers.

"If you're a very large company, you don't need to have a Chinese partner," said Richard McCombs, MBA Polymers' chief financial officer. But for a small company like privately held MBA Polymers, having a well-known, politically connected Chinese partner is invaluable, he says.

MBA Polymers found its local partner by using Galaxaco China Group LLC, a San Francisco company run by well-connected investment bankers George Sycip and Richard Chong, who scour China for deals, McCombs said. They brought in Guangzhou Iron & Steel, which wanted to diversify into new technologies.

MBA Polymers uses a proprietary technology to break down the hard plastic in discarded PCs so it can be re-molded by other companies and used again in other products. This appeals to Chinese officials, McCombs said, because the fast-developing nation has a huge appetite for plastic, which usually has to be imported. Breaking down the plastic within China allows the Chinese to avoid the costs and delays of importing the plastic they need for manufacturing, and helps to reduce China's widespread pollution by recycling material that would otherwise be buried in landfills or simply burned.

"There are millions of pounds of plastic," McCombs said.

MBA Polymers also operates a busy plant in Richmond, but struggles with the high cost of land and labor in California, he said. Both are cheaper in China, where the new plant employs state-of-the-art technology that is more advanced than anything the company uses in the United States.

McCombs acknowledges that doing business in China is not always easy for a U.S. company. Job turnover in booming Guangdong is high, with new enterprises spelling new opportunity. So, new workers often have to be hired and retrained. And local contractors can be unreliable. At MBA Polymers' new plant in the Nansha Development Zone near Guangzhou, all the electrical work had to be redone because the work was not good enough.

Add to that what many China-watchers decry as weak protection of intellectual property, corrupt Communist Party cadres and sometimes confusing contracts, and the challenges of operating in the world's sixth-largest economy can be daunting.

Still, the lure of this dynamic part of China is hard to resist.

For one thing, most infrastructure in the Nansha Development Zone at the water's edge just south of Guangzhou is ultramodern.

Much of the development around the province carries a "made in California" label. The first phase of Guangzhou's New Baiyun International Airport, which opened in July 2004 and cost $520 million, was built by Parsons Corp., a Pasadena rival of San Francisco's Bechtel Corp.

Already five times bigger than the city's old airport, it will grow still larger in the next few years, and may attract U.S. airlines. Certainly, airline interest is there. United Airlines has petitioned the U.S. and Chinese governments for permission to fly nonstop between San Francisco and Guangzhou, and has opened a small sales office in Guangzhou in the hope that permission will be granted.

South of the airport, two 35-story office towers are rising in central Guangzhou. They were designed by architect Brian Lee, a partner in the San Francisco office of Skidmore, Owings and Merrill LLP, which is busy in China. The firm has also worked on major projects in Shanghai and in Beijing, where Lee designed a huge, state-owned bank building.

"Guangzhou is very interesting," Lee said. "It's going through a growth phase now that's happened in Beijing and Shanghai already. Guangzhou is going to have a new central business district, a new library, a new Shangri-la Hotel, a new convention center."

California companies are not only designing and putting up new buildings, they're snapping up Chinese companies and opening offices throughout Guangdong province.

Achievo Corp. bought Guangzhou's Jeyo Computer Technology, a small Chinese outsourcing provider, late last year, and has big dreams in China, according to Achievo Chief Executive Officer Robert Lee. "We will grow both organically and through acquisitions," said Lee, who didn't disclose the price of the Jeyo purchase.

Lee, who was born in China and is now a U.S. citizen, is keen on China as an outsourcing locale, saying it's preferable in many ways to Bangalore and other famed Indian outsourcing centers.

"China is a lot closer to the U.S., time-zone-wise," he said. "The flights are easier. They're a lot cheaper. And the worker turnover rate in India is very high these days because of their success."

Privately held Achievo, which has been in China for four years and has 80 percent of its 600 employees there, has set up shop in a sprawling new industrial park near Shenzhen, a city of 7 million that sits on the border with Hong Kong.

Since its creation in the 1980s at the behest of China's late leader Deng Xiaoping, Shenzhen has been a manufacturing center and back-office city for Hong Kong, which many foreign companies choose for their regional Asia headquarters to take advantage of Hong Kong's strong banks, rule of law and business transparency.

Although Shenzhen is robustly profit-minded, touches of China's socialist command and control economy linger. Near Achievo's Shenzhen digs, recordings of brassy march tunes blare in the morning air, and a billboard admonishes workers to keep busy: "Empty talk endangers the nation. Positive work brings prosperity," it reads, in Chinese and English.

Achievo often uses Chinese information technology engineers for clients that include DaimlerChrysler, Toshiba and the United Way of Silicon Valley.

None of the drawbacks of doing business in China has stopped California companies from jumping into commercial hot spots like Guangdong province, says Guangpei He, a senior manager for Autodesk Software (China) Co. San Rafael's Autodesk claims 90 percent of the China market for architectural and construction software, according to Guangpei, and counts among its clients the Guangzhou Design Institute, which oversees development. The institute uses Autodesk 3-D software in its work and is considering other products from the Bay Area company, he said.

All this is consistent with the hustle and flow of Guangdong province, where intense development just seems to whet the appetite for more development, and work reigns supreme. On the road to the ferry terminal that links Shenzhen to Hong Kong, a hortatory billboard declares, "Time is money. Efficiency is life."

Guangdong at a glance

What it is: South China province that produces one-third of all Chinese exports and attracts nearly 30 percent of China's foreign direct investment. Population 110 million. Capital is Guangzhou (Canton), with a population of more than 10 million. Border boomtown is Shenzhen, population 7 million.

Historical connection: Guangdong is the ancestral homeland of many Chinese Americans, from the 19th century to today.

Why Bay Area firms are setting up shop there: Tax breaks, cheap land, fast track for building projects, modern rail, road, water and airport facilities and well-educated Pearl River Delta workforce for manufacturing. Proximity to Hong Kong for front-office administration, banking and shipping.